REVISED FLOOD EXCLUSIONS
FILED UNDER SEVERAL PROPERTY LINES

Responding to litigation arising from the catastrophic flooding following Hurricane Katrina, AAIS has filed new endorsements addressing water damage under several programs that provide property coverage.

In countrywide bulletins issued for the Agricultural Output (AgOP), Artisans, Businessowners, and Commercial Properties programs, AAIS recently  announced the filing of program-specific versions of a new mandatory water damage exclusion. The new exclusion replaces the water exclusion built into the policy terms with language that does the following:

• Explicitly references tsunamis, as well as tides, storm surge, storm tide, and tidal surge.

• Excludes loss from water that backs up through, overflows from, or is otherwise discharged from sewers or drains, sump pumps and related equipment, or any other type of system that removes subsurface water from the foundation area.

• Excludes loss by material present in or carried or otherwise moved by water that is excluded within these terms.

• Applies regardless of the cause of the water loss; that is, whether the presence of water is caused by an act of nature or whether the water escaped from a dam, levee, dike, or other feature designed to control the flow of water.

• Continues to make an exception for loss caused by any resulting fire, explosion, or sprinkler leakage.

The AgOP endorsement includes language revising the built-in sewer backup coverage to explicitly extend coverage to certain losses arising from sump pumps and other systems designed to remove subsurface water from foundation areas. In the other lines listed above, this and other refinements are made in newly revised optional endorsements for providing water backup and overflow coverage.

On Friday, Nov. 21, AAIS will issue a bulletin announcing the filing of similar mandatory water damage exclusions under its Mobile-Homeowners Program, with language amending the accidental discharge peril and seepage/leakage exclusion to preserve coverage, where applicable.

New language addressing water losses was introduced earlier in the filing of revised Homeowners forms announced in a previous Advisory.

The commercial lines, AgOP and Mobile-Homeowners filings all carry proposed effective dates of June 1, 2009.

FILING ACTION TO ADDRESS
NEW FLORIDA CONDO LAW

AAIS will be filing materials in the coming weeks to address new insurance requirements for residential unit-owners and condominium association insurance in Florida. A Florida law enacted this year contains the following insurance requirements:

• An association policy must include coverage for air conditioners and heating equipment.

• Each unit-owner policy must contain a provision making it excess over any other policy covering the same property.

• Each unit-owner policy must waive subrogation against the association.

• Each unit-owner policy must include "special assessment" coverage of no less than $2,000. 

• Each unit-owner policy must cover improvements and alterations made by unit owners that benefit fewer than all residents (such as an enclosed balcony).

• Each unit-owner policy must name the association as an additional named insured and loss payee.

In response, AAIS is planning to introduce some policy form changes.

Under the AAIS Dwelling Properties and Homeowners programs:

• Amendments to the Insurance Under More Than One Policy provision will indicate that the policy’s coverage is excess over the amount recoverable under any other policy covering the same property; and

• Endorsements will be introduced to enable a condominium association to be named as an insured and a loss payee with respect to property covered under Coverage A.

Under the Commercial Properties and Businessowners programs:

• Policy terms will be amended with respect to residential condominium association and unit-owner policies to address specific provisions within the statute; and

• New manual rules will be introduced to address the forms to be attached with respect to residential risks.

Companies are obligated to handle claims in compliance with the new requirements as of the law's Jan. 1, 2009 effective date. AAIS materials cannot be implemented until they have been approved by the insurance department.

REVISION BEING FILED TO
COMMERCIAL LIABILITY MANUAL

AAIS is filing revised state pages and a revised countrywide classifications table for its Commercial Liability Manual. The filing has a proposed effective date of June 1, 2009. (The manual being revised is the countrywide manual introduced in 1999 with inflation-sensitive rating bases.)

Among other things, the manual revision adds seven new classifications for bed and breakfast operations; snow and ice removal contractors; event, party, or wedding planners; Internet auctions; media manufacturing; portable toilet rentals; and telecommunications towers (the last for existence hazard and lessor's risk only). New class codes have been introduced for the new classifications, and loss costs rating information for existing classifications has been revised.

The manual's state-specific pages have been reformatted to distinguish between state exceptions to countrywide manual rules, and additional rules provided for a state.

In all states, a new rule is provided for implementing a new Commercial Liability endorsement that provides an exception to the auto exclusion for snow and ice removal operations. The exception applies only to injuries included in the products/completed work hazard.

NEW BOATOWNERS, ARTISANS, AND BOP
EDUCATIONAL MATERIALS ON AAISdirect

New educational materials on the 2008 AAIS Boatowners Program revision are now available in the Education section of AAISdirect, AAIS's online repository of forms, bulletins, manuals, and other program information.

The AAIS Boatowners Program is the industry's first standardized program for insuring small, privately owned watercraft. The new educational materials include:

• An overview of the boat market with information on demographics, hazards, underwriting considerations, valuation, and more;

• A comparison of the most recent countrywide coverage forms with the previous version;

• An annotated policy form with "pop-up" boxes that provide explanatory information where needed;

• Explanation of the rules and rating information;

• Rating examples; and

• Additional information on boat features, navigation, nautical terms, and more.

On Friday, Nov. 21 new educational material will be posted comparing features of the AAIS Artisans and Businessowners programs. This material provides tables comparing policy structures, eligibility distinctions, liability coverages, property coverages, and the coverages available through the PACE and APACE endorsements.

WEB SEMINAR RECORDINGS AND
BUILDERS' RISK PRESENTATION
NOW AVAILABLE

Recordings of two recent AAIS web seminars and another slide presentation are available at www.AAISonline.com, AAIS's public website. The three presentations include:

• The recording of an October web seminar featuring Pam Nykaza, senior product development specialist for inland marine, describing the latest revision to the AAIS Boatowners Program.

• A slide presentation, with audio commentary by Robert Guevara, AAIS vice president of inland marine. on the latest revision to the Builders' Risk section of the AAIS Inland Marine Guide.

• The recording of a November web seminar featuring Sherry Taylor, manager of farm and agribusiness, and Deborah Summerlin, vice president of insurance lines, describing the new AAIS Agricultural General Liability (AgGL) Program.
  
  Companies interested in using the AgGL can get a link to this recording by contacting Joyce Tignino, vice president of marketing and industry relations, at joycet@AAISonline.com, or by calling 800-564-AAIS.

For each of these presentations, you will need a computer with speakers to hear the audio commentary.

PROGRAM PLANNING UNDERWAY
FOR 2009 AAIS 'MAIN EVENT'

AAIS is now evaluating topics for its 2009 Main Event conference, April 26-28 in Half Moon Bay, Calif.

This executive conference focuses on product-related issues of strategic importance to property/casualty insurers. To that end, AAIS is seeking speakers on trends in science, technology, law, economics, and other fields that will impact property and liability risks and, consequently, the design and development of P/C insurance products.

There are two ways to submit ideas for topics:

• Use the AAISalert online submission form. This web page asks users to describe new exposures they are concerned about, indicate how they address the exposure or plan to address it, and how it is likely to affect property/casualty insurance.

• Contact Joseph Harrington, AAIS director of corporate communications, at joeh@AAISonline.com, or by calling 800-564-AAIS.

NEW JERSEY SETS AMOUNT OF
GUARANTY FUND SURCHARGE

A recent order from the New Jersey Department of Banking and Insurance announces that property/casualty insurers that paid their 2008 guaranty fund assessments can impose a surcharge of up to 0.9% of annual net direct written premium on policyholders in specified lines. The surcharge may be applied to policies issued or renewed on or after Nov. 1, 2008.